Proxy economic war with China
As confidence in Milei’s program faltered, focus shifted to whether the U.S. would make dollar support conditional on the cancellation of a pre-existing $18 billion swap line with Beijing. U.S. Special Envoy for Latin America Mauricio Claver-Carone publicly dubbed the facility “extortionate.”
In September, Bessent confirmed negotiations between the U.S. and Argentina for a direct dollar swap line, reinforcing speculation that the U.S. was trying to supplant Chinese influence in the region. The news had an immediate positive effect on the peso, breaking its fall.
After peaking at over 1,475 pesos, the dollar was back at 1,421 by late Friday in Europe, helped by news that a dollar-support package from Washington was imminent.
How long-lasting that effect will be is yet to be determined.
For now, Bessent and the IMF appear resolute that it’s just a matter of time until Milei’s policies will deliver the stability they’ve been promising. Rather than framing the U.S. swapline as a bailout, Bessent is treating the intervention as a trading play.
“This is not a bailout at all, there’s no money being transferred,” he told Fox News on Thursday. Under a swap line, two parties agree to exchange up to a certain amount of their currencies, on the understanding that it will be reversed at some time in the future.
“The ESF has never lost money, it’s not going to lose money here,” Bessent went on, arguing that the peso is “undervalued”.
He added that Milei remains a great U.S. ally who is committed to getting China out of Latin America, and said the U.S. was going “to use Argentina as an example.”
Not everyone is convinced that Milei’s policies will deliver the goods.
“They’ve done this over and over and over again,” said Steve Hanke, a professor at Johns Hopkins University and a veteran of various currency reform and stabilization packages. He argued that the package will provide “a little bit of a temporary band aid, but it won’t last very long.”